Fed launches probe of U.S. note trading.

NEW YORK - The Federal Reserve Bank of New York confirmed that it asked government securities dealers last week for information on their holdings of three-year and seven-year notes.

The request was a result of market surveillance efforts that the Fed started this year, a bank spokesman confirmed.

Trading in the repurchase market last week suggested a scarcity of a note issue because those who needed it were willing to lend money at below-market interest rates to acquire the securities. Dealers attributed the tightness to regular hedging and market activities.